Research group says huge tax increase in 2003 was unnecessary

Kirsten Searer

Monday, Jan. 24, 2005 | 9:28 a.m.

Nevada didn't need to raise taxes by a record $833 million in the 2003 legislative session, according to a new study by a free-market policy group.

The Nevada Policy Research Institute issued a white paper in time for today's State of the State address saying that if the state hadn't raised taxes in 2003 and had simply increased spending to match inflation, Nevada still would be looking at a $22 million surplus.

Instead, the government is expected to reap at least a $500 million surplus, perhaps substantially more.

Gov. Kenny Guinn, who already has proposed refunding about $300 million of that money to taxpayers through motor vehicle registrations, was expected to talk more today about what to do with the state surplus.

His spokesman, Greg Bortolin, said the tax increases made in 2003 were important because they diversified the tax base in Nevada beyond the gaming and sales taxes upon which the state previously relied.

The large surplus comes after a particularly strong economic year when 50 million people visited the state, he said. Sales tax revenue, for example, increased by 17 percent last year.

"This is an anomaly," Bortoline said. "It's never happened before, and history shows us that we have a downturn about every 10 years, and in between Nevada usually has a very robust economy. The economy in the past year is one for the record books."

He said Guinn relied on projections from the Economic Forum, a group of independent citizens who predict government expenses and revenue.

The paper, "Nevada's 2003 Tax Increases: Underlying Assumptions and Resulting Impact," argues that Guinn overestimated how much the state's expenses would increase.

The Temporary Assistance for Needy Families program, for example, is 42 percent below Guinn's predictions, the group said.

Ranson Webster, chairman of the group, argued in a press release that the state needs to establish better ways to forecast its expenses in the future. Both citizens and, to some extent, legislators were duped into supporting a tax increase in 2003, the group argues.

Sen. Bob Beers, R-Las Vegas, said he hadn't seen the report yet but the numbers made sense. Beers was one of the politicians who fought the tax increase in 2003 and has proposed repealing the taxes passed in 2003.

Sen. Warren Hardy, R-Las Vegas, wants to look at scaling back some of the tax increases passed in 2003, with an emphasis on giving money back to businesses that had a tax increase in 2003.

Some of the companies hardest hit by the new payroll tax, for example, were small businesses and gaming companies, he said.

Hardy said he's not necessarily opposed to the governor's plan to refund money through vehicle registration.

"I'm simply saying that at the Legislature we need to take some time to analyze it to make sure we're really giving the money back to those who paid," he said.

While Hardy said he doesn't think this year is an anomaly -- that there will be other major surpluses in the future -- he said he believes the tax system did need to be diversified in 2003.

"Diversifying and broadening our tax base was critically important," he said. "It was one of the primary reasons I voted for the tax package."